Yes, the IRS offers payment plans for tax bills you cannot pay in full

The IRS calls these installment agreements. If you owe federal income tax and cannot pay the whole amount by the important date, you can ask the IRS to let you pay in monthly chunks instead. The IRS will accept this request in most cases, though you will pay interest and penalties on top of what you owe, and the IRS charges a fee to set up the plan.

The process is straightforward: you tell the IRS how much you can pay each month, they approve it (or counter with a different amount), and you make those payments until the debt is gone. You can set this up yourself without a tax professional, though the IRS website and phone lines can be slow during tax season.

Key Takeaways

  • The IRS will set up a monthly payment plan for almost any unpaid tax bill, but you must request it before or shortly after the tax important date.
  • You pay a setup fee (between $31 and $225 depending on how you set up the plan) plus interest and penalties on the unpaid balance.
  • The IRS offers two main types: a short-term plan (120 days or less) with no setup fee, and a long-term plan (longer than 120 days) with a fee.
  • You can set up a plan online through IRS.gov, by phone at 1-800-829-1040, or by mailing Form 9465 with your tax return or bill notice.
  • If your monthly payment is too low to cover interest and penalties, your debt will grow even as you pay, and the plan can last many years.

The two types of IRS payment plans

A short-term payment plan covers bills you can pay off in 120 days or less. There is no setup fee. You straightforward contact the IRS, tell them your payment amount, and start paying. This is the cheapest route if you can manage it, because you avoid the setup fee entirely.

A long-term installment agreement is for bills that will take longer than 120 days to pay. This is where most people end up. The IRS charges a setup fee ($31 to $225 depending on your method) and you pay interest and penalties on the unpaid balance each month until it is gone. The longer the plan, the more interest you pay.

Within long-term plans, the IRS offers a few variations. A standard installment agreement lets you choose your own monthly payment amount (as long as it is high enough to pay off the debt within six years). A streamlined installment agreement has lower fees but stricter rules: your monthly payment is calculated by the IRS based on what you owe, and you cannot change it without reapplying.

How much the plan costs you

You pay three separate costs: the setup fee, interest, and penalties. The setup fee is a one-time charge when you create the plan. If you set it up online or by phone, it is $31 to $225 depending on your income level. If you mail in Form 9465, the fee is lower. If you set up a short-term plan (120 days or less), there is no setup fee at all.

Interest accrues daily on your unpaid balance. The IRS publishes a quarterly interest rate; as of early 2024, it is around 8 percent per year, but this changes. You pay this interest whether you have a payment plan or not — it is the cost of borrowing from the government.

Penalties also accrue. If you filed your return late, you owe a failure-to-file penalty. If you did not pay on time, you owe a failure-to-pay penalty. These penalties are a percentage of what you owe and continue to grow until the debt is paid. A payment plan does not stop these penalties; it only lets you pay the total over time.

How to request a payment plan

You have three main routes: online, by phone, or by mail. The online route is fastest if you have access to a computer. Go to IRS.gov, find the "Payment Plans" section, and use the Online Payment Agreement tool. You will need your Social Security number, the tax year in question, and your bank account information if you want to pay by automatic withdrawal. The IRS will tell you when ready whether your plan is approved.

By phone, call the IRS at 1-800-829-1040. Wait times are long during tax season (January through April), but the agent can set up your plan while you are on the call. Have your tax bill notice in front of you and be ready to say how much you can pay each month.

By mail, fill out Form 9465 (Installment Agreement Request) and send it with your tax bill notice or with your tax return if you have not filed yet. Mail it to the address shown on your bill notice. This takes longer — usually two to four weeks — but the setup fee is lower than the online or phone route.

What happens after you are approved

Once the IRS approves your plan, you will receive a notice showing your monthly payment amount, the due date each month, and the total amount you will pay. Set up automatic payments from your bank account if you can; this is the safest way to stay on track and avoids late fees.

Your monthly payment goes toward the principal (what you actually owe) first, then toward interest and penalties. If your payment is very small — say, $25 a month on a $5,000 debt — the interest and penalties may grow faster than your payment shrinks the principal. This means your total debt could grow even as you pay, and the plan could last many years.

If your financial situation improves, you can pay more than your monthly amount at any time without penalty. If it gets worse, you can ask the IRS to lower your payment, but you will need to show proof of hardship and the plan will last longer.

What disqualifies you or makes approval harder

The IRS will reject your request if you have not filed a tax return for the year in question. You must file first, even if you cannot pay. The IRS also rejects requests if you are currently in a bankruptcy proceeding or if you owe more than $50,000 (though this limit varies by situation and the IRS may still work with you).

If you have failed to pay a previous installment agreement, the IRS is less likely to approve a new one. If you have not paid your current taxes on time in the past few years, the IRS may require a larger monthly payment or a shorter plan length.

If you are self-employed or own a business, the IRS may require you to make quarterly estimated tax payments going forward as a condition of the plan. This prevents the debt from growing again.

Alternatives if a payment plan does not work

If your debt is very large or your income is very low, a standard payment plan may not be realistic. The IRS offers a Currently Not Collectible status, which temporarily pauses collection efforts while interest and penalties continue to accrue. This is not forgiveness — you still owe the debt — but it stops the IRS from garnishing your wages or seizing your bank account while you are in hardship.

You can also explore an Offer in Compromise, which is a settlement where you pay less than you owe. This is much harder to get approved for and requires detailed financial paperwork, but it is an option if you truly cannot pay the full amount even over many years.

If you have a large tax debt and limited income, a tax professional or a nonprofit tax clinic may be able to help you navigate these options. The IRS also funds free tax help through VITA (Volunteer Income Tax information) sites, which can advise you on payment plans.

Frequently Asked Questions

Can I set up a payment plan if I have not filed my tax return yet?

No. You must file your return first, even if you cannot pay. Once you file, you can request a payment plan. If you file late, you will owe a failure-to-file penalty on top of the tax itself, but the payment plan will cover the whole amount.

What if I miss a payment?

The IRS will send you a notice. If you miss three payments in a row, the IRS can cancel your plan and demand full payment. If you miss one payment, contact the IRS when ready to reschedule or ask for a lower payment amount. It is easier to fix a single missed payment than to let it become a pattern.

Does a payment plan stop the IRS from garnishing my wages?

Yes, as long as you keep making your monthly payments. If you stop paying, the IRS can resume wage garnishment or bank levies. If your financial situation changes and you cannot afford the payment, contact the IRS to modify the plan before you miss a payment.

How long does a payment plan usually last?

It depends on your debt and your monthly payment. A small debt with a reasonable payment might be paid off in one to two years. A large debt with a small payment could take five to ten years or longer. The IRS prefers plans that last no more than six years, but will approve longer ones in some cases.

Can I pay off my plan early without a penalty?

Yes. You can pay any amount above your monthly payment at any time, and there is no penalty for paying off the plan early. This saves you money on interest, since interest stops accruing once the debt is paid.